NY April Fool’s Day Deal Solves Housing Crisis, Pleases All

New York’s state budget is due today, April Fool’s Day. It’s supposed to include housing legislation, so I spent the weekend getting some headlines ready:

Socialists, real estate industry agree on reform
Albany politicians solve housing crisis
State bans evictions, rent hikes, foreclosures. Everyone gets a pony!

Obviously, none of this will happen. Negotiations between the Real Estate Board of New York and the Building and Construction Trades Council over the replacement of the expired multifamily development tax break 421a broke down. Developers and construction unions couldn’t agree on wages for tax-abated projects.

This was no surprise. The last time 421a expired it took REBNY and BCTC more than a year to compromise on a plan. To expect a result in a few weeks, especially without a heavy-handed governor to pressure them, was unrealistic.

Both sides would benefit from robust multifamily construction: Developers would build projects and union workers would be paid to build and operate them. So why is this so difficult?

The unions want wages set high enough that no one getting a tax break will hire nonunion workers. REBNY doesn’t want wages set so high that few projects make financial sense. Projects in non-prime markets or with a high percentage of affordable units don’t pencil out if construction workers cost $72 an hour and all the doorman and cleaning jobs go to 32BJ SEIU, the union for building service employees.

Upon reaching an impasse, both sides punted the issue to Albany. Each has some leverage: The unions provide political support to lawmakers who take their side, and although REBNY can’t put boots on the ground on Election Day, it can make campaign donations.

However, money doesn’t buy as much influence as it used to. REBNY’s main argument is: Do you want to solve the housing crisis or not?

The politicians say they do, but actions speak louder than words. Most of them are too chicken to say “no” to unions, NIMBYs and tenant activists.

Electeds love to pontificate about “good union jobs” but don’t acknowledge that prevailing-wage requirements drive up the cost of housing (or that union construction workers tend to be middle-class white guys from the suburbs).

They wax poetic about preserving neighborhood character but don’t admit that low-density zoning exacerbates both the housing shortage and gentrification. They complain about tax breaks for new rentals but not for single-family homes worth millions of dollars.

They demand a high percentage of low-rent units and other goodies, like a new school or free community space, but don’t understand the impact on a project’s viability. They have only raised money for campaigns, not for developments.

It was Andrew Cuomo’s idea in 2015 to have REBNY and BCTC work out a 421a deal. The governor did that because REBNY had worked one out with Mayor Bill de Blasio, whom Cuomo despised.

The mayor was newly elected and his liberal bona fides might have carried the deal through Albany, but Cuomo didn’t want him to get any credit. So Cuomo made BCTC’s Gary LaBarbera an ally and forced REBNY to come to terms with the group. Passage in Albany was easy once organized labor and management had agreed.

That won’t happen this time. Cuomo is gone, progressives have killed 421a, the pandemic has crushed aging office buildings, interest rates have soared, construction costs are up and housing is less affordable than ever.

It’s up to lawmakers to solve the housing crisis and take the hits from any constituencies that don’t like the outcome. Which will be most of them.

Albany cannot end the housing shortage by giving citywide prevailing wage to the unions, universal rent control to the socialists, cheap property taxes to townhouse owners, low-density zoning to the NIMBYs and extreme affordability to the progressives.

Not everyone can get a pony.